Michigan residents who use — or might someday like
to use — a state park should review the disturbing presentations and
spreadsheets the Department of Natural Resources has on its
Web site. They reveal a system at risk of falling into a death spiral:
declining demand, budget pressures, maintenance backlog and very uneven usage.

The DNR’s 2006 $4-per-night "short-term fee hike"
for the most in-demand parks is a half-step toward a solution. But what’s needed
is a leap that leaves behind the old "first-come, first-served" reservations
model. A fee hike, short-term or otherwise, not only fails to solve the park
system’s problems, it keeps DNR doing what it does worst: setting fixed
year-round prices for campsites whose value varies immensely throughout the
year.

One DNR presentation is called "Revenue
Enhancement Ideas." Essentially, it offers only two main ideas: raise fees
in the parks or find new money outside them (e.g., by diverting lottery money
from schools, grabbing a slice of dedicated sales tax, borrowing — as if that
were a funding source — or finding "other dedicated funding," such as from
tobacco settlement revenue). The presentation does mention — in a single line —
the only idea likely to work: using variable pricing to create more revenue by
charging more for "utility hookups, prime sites, prime parks and prime seasons."

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Despite obvious differences, hotels and public state
parks actually have much in common, mainly because they face the same big
problem: wildly uneven demand. Worse yet, hotel rooms and campsites can’t be
saved when demand drops off, the way butter or milk can be stored. For that
reason, hotels and state parks can’t recoup anything from empty rooms or
campsites. Once that revenue is lost, it’s gone for good.

When hotels have excess vacancies, they cut prices
to fill the empty rooms. At the same time, they raise prices for those rooms and
suites that rent quickly, recognizing that those rooms have amenities that the
guests value and will pay more to have. This lets the hotel gain more revenue
from some guests, while still offering other rooms at lower rates. They
constantly adjust their offerings to find the right mix of rates and amenities.

The DNR should learn from this and adopt variable
pricing strategies as well. There’s a simple, highly-efficient way to do it:
drop fixed-rate charges and auction off campsite reservations instead. Modern
auction software lets people offer a minimum and a maximum bid online or over
the phone. The software then "runs" the auction, starting at the opening bid and
automatically raising bids to their maximum in steps until the high bidder wins.

The system would set the starting bid at half the
current fixed rate for each site, with the minimum dropping if no one bids on
the campsite as the reservation date approaches. Auctions would generate much
greater revenue from high-demand parks (which are already booked solid). But
auctions would also yield more revenue from current low-demand parks, because a
discount rental still earns more than a vacancy. And auctions would clearly
highlight those parks, if any, that don’t have much value as public campsites.

With auctions, instead of the DNR charging the same
fixed price for an off-season reservation as it does for Memorial Day, the
Fourth of July and Labor Day weekends, campers would determine the site and
services they want and how much they are worth.

What about less well-off people? Will they be able to afford a campsite? Yes.
Auctions bring prices to the right level. By cutting prices at our less-used
parks, more sites will be more affordable and accessible than ever.

And we can also help people of modest means by giving them credit for past
unsuccessful bids. Say that, every week, Joe and Jane Camper bid on a popular
Lake Michigan park campsite. But, because of their tight budget, they haven’t
ever won the auction. By adding a credit — say, a dollar for every past auction
where they bid at least today’s rental rate — then Joe and Jane are more likely
to win later auctions, while only paying the lower amount that they actually
bid.

Ultimately, our parks must either raise revenues or
cut costs by deferring maintenance or closing parks. We can only raise revenues
in two ways: either we take more money from everyone in Michigan — regardless of
whether they use the parks — or we have to get more money from park users,
including our many out-of-state visitors.

Auctions are the most efficient way to find the
exact right price, which is the one that optimizes both access and revenue,
results in fewer vacancies, and generates more money for park preservation. The
only hard part is that it requires new thinking. That’s why it’s time for the
DNR to park its old thinking about setting prices for reservations in the park.

#####

John M. Gear is an attorney and an adjunct scholar
with the Mackinac Center for Public Policy, a research and educational institute
headquartered in Midland, Mich. Permission to reprint in whole or in part is
hereby granted, provided that the author and the Center are properly cited.